I've been meaning to pass along my thoughts on Andrew Ross Sorkin's Too Big to Fail. Overall, I thought it was an excellent book. It'll be extremely hard, if not impossible, for anyone to top TBTF as the definitive blow-by-blow account of the September '08 market panic. I was expecting a book along the lines of Roger Lowenstein's When Genius Failed (about the LTCM crisis), but TBTF went well beyond Lowenstein's classic in terms of the level of detail. It was also, not surprisingly, a very exciting story. As anyone who was in the Financial District and/or Midtown for the post-Lehman fallout can tell you, it was a genuinely frightening time, but also a terribly exciting story. I've seen several people complain about the length of the book (624 pp.), but believe me, it's a quick read — I read it cover-to-cover in 2 nights. I also think that's a strange complaint, because to me, TBTF's length is its most attractive feature. The longer the book, the more detail — and as a lawyer, I love me some detail!
The fact that Sorkin was able to do as much research as he clearly did in just under a year is amazing. That in itself is an impressive feat. It's also why I think so many of us were pleasantly surprised by TBTF; normally, you'd expect it to take at least a couple years to compile that much research. Both TBTF and William Cohan's House of Cards (about the Bear Stearns collapse) broke the mold in that regard. Stylistically, I really like the fact that TBTF picks up almost exactly where House of Cards left off. It essentially makes the books a pair, and I think it's appropriate to think of the books as Volume I and Volume II of the Financial Crisis of 2008.
A few criticisms: First, no table of contents! For OCD readers like me, who enjoy things like a good index, that's torture. (On the other hand, the extensive "Cast of Characters" was much appreciated.) There are a few parts of the story I'd quibble with (but for my professional obligations, of course), but they were mostly along the lines of, "Oh, they were considering that option well before that!" They didn't detract from the overall book, and I don't really blame Sorkin, because let's be honest: sources shade the truth, both consciously and unconsciously. If you ask all 30 people who were in a given meeting last September what happened in the meeting, you'd get at least 15 different accounts. Personally, I would've liked some more numbers — things like, for example, the amount in overnight repo lines and prime brokerage "free credits" that Morgan Stanley was losing each day. Sorkin only got into the nitty-gritty of the major banks' financing positions during the crisis sporadically, and mostly stuck to indicators like share prices and equity indexes. That's fine; I wasn't expecting an appendix filled with statistical tables. It is, however, reflective of the fact that the book was largely an account of the crisis from the perspective of the c-level executives and senior government officials. It wasn't written from the perspective of the trading floor — which, in any event, was eerily boring during the crisis (save for the financing desks of course).
Overall, I think it's safe to say that TBTF will immediately go on the semi-official "modern Wall Street classics" shelf with Liar's Poker, Barbarians at the Gate, and the rest. My criticisms, which I consider minor, should be taken in that context. I think the success of TBTF will make books like Charlie Gasparino's The Sellout irrelevant in the long-run — Nicholas Dunbar's Inventing Money to Lowenstein's When Genius Failed, so to speak. I haven't read The Sellout yet, but I haven't heard rave reviews, and like literally everyone else on Wall Street, I generally think Gasparino is a buffoon. (Indeed, one of the most amusing things about watching Gasparino is the fact that he clearly thinks he's a Very Serious, Respected Person.)
Now, a few random highlights —
Hank Paulson berates Chris Cox:

Cox, for whom Paulson had had very little respect to begin with, was proving how over his head he really was. Paulson had assigned him the task of coordinating Lehman’s filing by, well, now. “This guy is useless,” he said, throwing his hands up in the air and heading over the Cox’s temporary office himself.
After barging in and slamming the door, Paulson shouted, “What the hell are you doing? Why haven’t you called them?”
Cox, who was clearly reticent about using his position in government to direct a company to file for bankruptcy, sheepishly offered that he wasn’t certain if it was appropriate for him to make such a call.
“You guys are like the gang that can’t shoot straight!” Paulson bellowed. “This is your fucking job. You have to make the phone call.” (emphasis mine) (TBTF, p. 366)

During Lehman's final board meeting, in which the board voted to file for bankruptcy, Henry "Dr. Doom" Kaufman, who was a Lehman board member and chaired the firm's Finance and Risk Committee, blamed Lehman's failure on — who else? — the regulators:

Kaufman had been sharply critical of the Fed earlier in the year, accusing the central bank of “providing only tepid oversight of commercial banking.” Now he again took aim at the government for pushing Lehman into bankruptcy.
“This is a day of disgrace! How could the government have allowed this to happen?” Kaufman thundered. “Where were the regulators?” (emphasis mine) (TBTF, p. 368)

As Kindler and Taubman were reviewing the [letter of intent on a $9bn equity injection from Mitsubishi UFJ], they laughed at all the news coverage about their weekend of whirlwind merger talks. Various media outlets had the news backward or were reporting old rumors. Gasparino declared on television that Morgan Stanley was about to do a deal with either Wachovia or CIC. “The most fucking dangerous man on Wall Street,” Kindler sighed. (emphasis mine) (TBTF, p. 482)

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comments:

Anonymous
said...

Thanks for this review! I'll probably pick up the book for holiday reading.

Think you should read a lesser known Lehman Book called "The Murder of Lehman Brothers." About half the length and not filled with detail that really just satisfies voyeuristic curiosity. Instead it's a crisp account of the Lehman story that also explains the foundation for the crisis. It kept me turning the pages - even though I knew how it would end, and along the way it explained why my 401K is now worth so much less. It wasn't all Dick Fuld. The Murder of Lehman explains the whole basis for the crisis. Think you should review it and that anyone who wants to understand the crisis rather than just hear inside stories about powerful Wall Street execs and politicians.

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I'm a finance lawyer in New York. I used to focus on derivatives and structured finance (you know, back when there was a structured finance market). I spent the majority of my career at one of the major investment banks. My background is in economics and, unfortunately, politics.

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